By Nell Macketzie, Summer Zhen and Carolina Mandl
LONDON (Reuters) – Worldwide hedge funds who want to navigate in the trade of the US -China, gather Chinese stock game in the hope of making enormous profit if Beijing forms a pact with Donald Trump, or if the rest of the world and China unite against The US president.
If bets with a lower risk, they should not be hit too hard, say various fund managers and investment professionals.
Hedge funds currently have the most Chinese shares they have in 12 months, but compared to history, levels remain low, Morgan Stanley wrote on Monday in a Prime Brokerage notion.
The American hedge fund community, which represents most of the industry, currently assigns about 3% of its portfolios to China, Morgan Stanley said.
For comparison: worldwide hedge funds, around 60% of their trade flows to the United States in the week until 14 February, showed a separate Goldman notion.
A relatively robust economy in combination with expectations for deregulation and tax cuts under Trump continues to strengthen American markets.
In the meantime, China is still fighting a real estate crisis and high debts, which means that hedge funds remain careful about assigning cash to the No.2 economy in the world.
But funds that stayed away from China lost a sharp rally in shares from September. Driven by Economic Stimulans, Chinese Shares Hoped 2024 with their first annual profit since 2020.
That is why some American hedge funds have been taken back in Chinese shares, where they found cheap and lower risks to do this.
David Aspell, a portfolio manager at the Macro Hedge Fund Mount Lucas of $ 1.7 billion, said he bought call options and gave him the right to a share, but only if it affects a certain price. These came cheap because the price they have to touch is considered far above the current trading prize, he said.
He also has exposure to China index funds and individual shares and thinks that rate will relieve headwind, and claims that Trump wants a trade agreement with China that serves the American interests.
China’s choice
After having promised 60% rates for Chinese import before he was chosen, Trump has revised that to 10% since he took office.
“China now has a choice. If it will not be in the club, the US can cut it off,” said Asper.
“At that time, China will have to find other markets to absorb his enormous export capacity, which may or may not exist.”
Aspell added that he was an optimistic that a trade agreement could happen, although the path could be bumpy.
Boaz Weinstein, founder of the Saba Capital Management of $ 5 billion, noticed how some Chinese shares under the levels of business introduction act after costs, so that they are undervalued.
